a . 1, 2 and 3 only b . 2 and 4 only C . 3 and 4 only d. All four items 4 . equity? which of the following may appear as separate items in a statement of changes in 1. Dividends on equity shares paid during the period 2. Loss on sale of investments 3. Proceeds of an issue of ordinary shares 4. Dividends proposed after the year end a . 1, 3 and 4 only b. 1, 2 and 4 only c. 1 and 3 only d. All four items 5. Which of the following items could appear in a statement of cash flows? 1. Proceeds of issue of shares 2. Proposed dividends 3. Irrecoverable debts written off 4. Dividends received a. 1, 2 and 3 only b. 1, 2, 3 and 4 only c. 1 and 4 only d. 2 and 3 only 6. In preparing the cash flows from operating activities section of a statement of cash flows (using the indirect method), which of the following statements are correct? 1. Loss on sale of operating non-current assets should be deducted from profit before tax. 2. Increase in inventory should be deducted from operating profits. 3. Increase in payables should be added to operating profits. 4. Depreciation expense should be added to profit before tax. a. 1, 2 and 3 b. 1, 2 and 4 C. 1, 3 and 4 d. 2, 3 and 4NAME: SCORE: SECTION: PROFESSOR: Multiple Choice 1. Which of the following might appear as an item in a statement of changes in equity? 1. Gain on disposal of properties 2. Appropriation for treasury stocks 3. Equity dividends proposed after the reporting date 4. Issue of share capital a. 1, 3 and 4 only b. 2 and 4 only . 1 and 2 only d. 3 and 4 only 2. The following items required consideration in preparing the financial statements: On Jan. 1, 2019, the corporation made a loan of P120,000 to an employee, payable on Apr. 30, 2020 with an interest of 2% per annum. On due date, she's expected to pay the loan and the total interest. The corporation paid P90,000 for insurance in 2019 covering the year ending Aug. 31, 2020. On Jan. 2, 2020, the corporation received rent from a tenant P40,000 covering the six months to Dec. 31, 2019. What is the total amount to be included in the statement of financial position as at Dec. 31, 2019? Receivables and Prepayments Payables and Accruals a. P220,000 P 2,400 b. P222,400 zero C. P102,400 zero P162,400 P60,000 3. Which of the following statements about financial statements are correct? 1. In preparing a statement of cash flows, either the direct or the indirect method may be used. Both lead to the same figure for net cash from operating activities. 2. Loan notes can be classified as current or non-current liabilities. 3. Financial statements must disclose a corporation's total expense for depreciation, if material. 4. A corporation must disclose by a note the details of all adjusting events effected in the financial statements. 7-24 | WIN Ballada's Partnership and Corporation Accounting7. In preparing a statement of cash flows, the following figures are considered in the calculation of cash flows from operating activities (using the indirect method): P980,000 Depreciation Expense 40,000 Gain on Sale of Non-Current Assets 130,000 Increase in Inventories 100,000 Decrease in Receivables 80,000 Increase in Payables What will be the net effect of these items? P890,000 a. Addition to operating profit P890,000 b. Subtraction from operating profit P1,070,000 c. Addition to operating profit P990,000 d. Addition to operating profit 8. Part of a corporation's draft statement of cash flows is shown below: Profit before Tax P1,864,000 Depreciation Expense (216,000) Proceeds of Sale of Non-Current Assets 36,000 Increase in Inventory (33,000) Increase in Accounts Payable 44,000 The following criticisms of the above extract have been made: 1. Depreciation expense should have been added not deducted. 2. Increase in inventory should have been added not deducted. Increase in accounts payable should have been deducted not added. 4. Proceeds of sale of non-current assets should not appear in this section of the statement of cash flows. Which of these criticisms are valid? a. 2 and 3 only b. 1 and 4 only c. 1 and 3 only d. 2 and 4 only 9. In preparing a statement of cash flows, which of the following items could form part of cash flows from financing activities? 1. Proceeds of sale of premises 2. Dividends received 3. Bonus issue of shares 4. Settlement of notes payablea. 1 only b. 2 only c. 3 only d. 4 only 10. In the preparation of the financial statements for 2020, the ending inventory was uncorrected? understated by P300,000. What will be the effect of this error if it remains a. The 2020's profit will be overstated and 2021's profit will be understated. b. The 2020's profit will be understated but there will be no effect on 2021's profit. c. The 2020's profit will be understated and 2021's profit will be overstated. d. The 2020's profit will be overstated but there will be no effect on 2021's profit. 11. On July 1, 2020, E. Cristobal Corp. acquired a service vehicle for P200,000. It is to be depreciated on a straight line basis at 20% per year. The estimated salvage value is P40,000 at the end of five years. The corporation makes proportionate depreciation charges in the year of purchase. The P200,000 cost was correctly credited but posted as a debit to the repairs account. How will the profit for the year ended Dec. 31, 2020 be affected by the error? a. Understated by P184,000 b. Understated by P168,000 c. Overstated by P184,000 d. Overstated by P200,000
